The next generation of global payments: Afterpay + Square

Published August 2, 2021

Dana Stalder
Contributor

Dana Stalder is a partner at Matrix Partners. The former commercial chief (Product, Sales and Marketing) at PayPal, he now leads fintech investing at Matrix Partners, where he also invests in consumer marketplaces and enterprise software.

Critical innovations in fintech

Every five to 10 years, the global payments industry undergoes a critical innovation cycle that determines the winners and losers for the next several decades. The last major transition was the shift to NFC-based mobile payments, which I wrote about in 2015. The major mobile OS vendors (Apple and Google) cemented their position in the global payments stack by deftly bridging the needs of the networks (Visa, Mastercard, etc.) and consumers by way of the mobile devices in their pockets.

Afterpay sparked the latest critical innovation cycle. Conceived in a living room in Sydney by a millennial, Nick Molnar, for millennials, Afterpay had a key insight: Millennials don’t like credit.

Millennials came of age during the global mortgage crisis of 2008. As young adults, they watched their friends and family lose their homes by overextending on mortgage debt, bolstering their already lower trust for banks. They also have record levels of student debt. Therefore, it’s no surprise that millennials (and Gen Z right behind them) strongly prefer debit cards over credit cards.

But it’s one thing to recognize the paradigm shift and quite another to do something about it. Nick Molnar and Anthony Eisen did something, ultimately building one of the fastest-growing payments startups in history on their core product: Buy now, pay later … and never any interest.

Afterpay’s product is simple. If you have $100 in your cart and choose to pay with Afterpay, it will charge your bank card (typically a debit card) $25 every two weeks in four installments. No interest, no revolving debt and no fees with on-time payments. For the millennial consumer, this meant they could get the primary benefit of a credit card (the ability to pay later) with their debit card, without the need to worry about all the bad things that come with credit cards — high interest rates and revolving debt.

All upside, no downside. Who could resist? For the early merchants, virtually all of whom relied on millennials as their key growth segment, they got a fair trade: Pay a small fee above payment processing to Afterpay, get significantly higher average order values and conversions to purchase. It was a win-win proposition and, with lots of execution, a new payment network was born.

Image Credits: Matrix Partners

Imitation is the greatest form of flattery

Afterpay went somewhat unnoticed outside Australia in 2016 and 2017, but once it came to the U.S. in 2018 and built a business there that broke $100 million net revenues in only its second year, it got attention.

Klarna, which had struggled with product-market fit in the U.S., pivoted their business to emulate Afterpay. And Affirm, which had always been about traditional credit — generating a significant portion of their revenue from consumer interest — also noticed and introduced their own BNPL offering. Then came PayPal with “Pay in 4,” and just a few weeks ago, there has been news that Apple is expected to enter the space.

Afterpay created a global phenomenon that has now become a category embraced by mainstream players across the industry — a category that is on track to take a meaningful share of global retail payments over the next 10 years.

Afterpay stands apart. It has always been the BNPL leader by virtually every measure, and it has done it by staying true to their customers’ needs. The company is great at understanding the millennial and Gen Z consumer. It’s evident in the voice, tone and lifestyle brand you experience as an Afterpay user, and in the merchant network it continues to build strategically. It’s also evident in the simple fact that it doesn’t try to cross-sell users revolving debt products.

Most importantly, it’s evident in the usage metrics relative to competition. This is a product that people love, use and have come to rely on, all with better, fairer terms than were ever available to them than with traditional consumer credit.

Image Credits: Afterpay H1 FY21 results presentation

Square + Afterpay: The perfect fit

I’ve been building payment companies for over 15 years now, initially in the early days of PayPal and more recently as a venture investor at Matrix Partners. I’ve never seen a combination that has such potential to deliver extraordinary value to consumers and merchants. Even more so than eBay + PayPal.

Beyond the clear product and network complementarity, what’s most exciting to me and my partners is the alignment of values and culture. Square and Afterpay share a vision of a future with more opportunity and fewer economic hurdles for all. As they build toward that future together, I’m confident that this combination is a winner. Square and Afterpay together will become the world’s next generation payment provider.

Why Square is shelling out $29B to snag BNPL player Afterpay

Lilium in talks with Brazilian airline for $1B order

Published August 2, 2021

German electric aircraft startup Lilium is negotiating the terms for a 220-aircraft, $1 billion order with one of Brazil’s largest domestic airlines, the companies said Monday. Should the deal with Azul move forward, it would mark the largest order in Lilium’s history and its first foray into South American markets.

“A term sheet has been signed and we will move toward a final agreement in the coming months,” a Lilium spokesperson told TechCrunch.

The 220 aircraft would fly as part of a new, co-branded airline network that would operate in Brazil. Should the two companies come to an agreement, Azul would operate and maintain the fleet of the flagship seven-seater aircraft, and Lilium would provide custom spare parts, including replacement batteries, and an aircraft health monitoring platform.

Deliveries would commence in 2025, a year after Lilium has said it plans to begin commercial operations in Europe and the United States. These timelines are dependent upon Lilium receiving key certification approvals from each country’s requisite aerospace regulator. Azul said in a statement it would “support Lilium with the necessary regulatory approval processes in Brazil” as part of the agreement.

Even if a deal is reached, it would likely be subject to Lilium hitting certain performance standards and benchmarks, similar to the conditions of Archer Aviation’s $1 billion order with United Airlines. Still, orders of this value are seen as a positive signal to markets and investors that an electric vertical take-off and landing aircraft is more than smoke and mirrors.

Also like Archer, Lilium is planning on taking the SPAC route to going public. The company in March announced its intention to merge with Qell Acquisition Corp. and list on Nasdaq under ticker symbol “LILM.” SPACs have become a popular vehicle for public listing across the transportation sector, but they’ve become especially popular with capital-intensive eVTOL startups.

The merger may be necessary for the company’s continued operations. According to the German news website Welt, Lilium added a risk warning to its 2019 balance sheet noting that it will run out of money in December 2022 should the SPAC merger not be completed.

The air taxi market prepares to take flight

Cloud infrastructure market kept growing in Q2, reaching $42B

Published August 2, 2021

It’s often said in baseball that a prospect has a high ceiling, reflecting the tremendous potential of a young player with plenty of room to get better. The same could be said for the cloud infrastructure market, which just keeps growing, with little sign of slowing down any time soon. The market hit $42 billion in total revenue with all major vendors reporting, up $2 billion from Q1.

Synergy Research reports that the revenue grew at a speedy 39% clip, the fourth consecutive quarter that it has increased. AWS led the way per usual, but Microsoft continued growing at a rapid pace and Google also kept the momentum going.

AWS continues to defy market logic, actually increasing growth by 5% over the previous quarter at 37%, an amazing feat for a company with the market maturity of AWS. That accounted for $14.81 billion in revenue for Amazon’s cloud division, putting it close to a $60 billion run rate, good for a market leading 33% share. While that share has remained fairly steady for a number of years, the revenue continues to grow as the market pie grows ever larger.

Microsoft grew even faster at 51%, and while Microsoft cloud infrastructure data isn’t always easy to nail down, with 20% of market share according to Synergy Research, that puts it at $8.4 billion as it continues to push upward with revenue up from $7.8 billion last quarter.

Google too continued its slow and steady progress under the leadership of Thomas Kurian, leading the growth numbers with a 54% increase in cloud revenue in Q2 on revenue of $4.2 billion, good for 10% market share, the first time Google Cloud has reached double figures in Synergy’s quarterly tracking data. That’s up from $3.5 billion last quarter.

Synergy Research cloud infrastructure market share chart.

Image Credits: Synergy Research

After the Big 3, Alibaba held steady over Q1 at 6% (but will only report this week), with IBM falling a point from Q1 to 4% as Big Blue continues to struggle in pure infrastructure as it makes the transition to more of a hybrid cloud management player.

John Dinsdale, chief analyst at Synergy, says that the Big 3 are spending big to help fuel this growth. “Amazon, Microsoft and Google in aggregate are typically investing over $25 billion in capex per quarter, much of which is going towards building and equipping their fleet of over 340 hyperscale data centers,” he said in a statement.

Meanwhile, Canalys had similar numbers, but saw the overall market slightly higher at $47 billion. Their market share broke down to Amazon with 31%, Microsoft with 22% and Google with 8% of that total number.

Canalys analyst Blake Murray says that part of the reason companies are shifting workloads to the cloud is to help achieve environmental sustainability goals as the cloud vendors are working toward using more renewable energy to run their massive data centers.

“The best practices and technology utilized by these companies will filter to the rest of the industry, while customers will increasingly use cloud services to relieve some of their environmental responsibilities and meet sustainability goals,” Murray said in a statement.

Regardless of whether companies are moving to the cloud to get out of the data center business or because they hope to piggyback on the sustainability efforts of the Big 3, companies are continuing a steady march to the cloud. With some estimates of worldwide cloud usage at around 25%, the potential for continued growth remains strong, especially with many markets still untapped outside the U.S.

That bodes well for the Big 3 and for other smaller operators who can find a way to tap into slices of market share that add up to big revenue. “There remains a wealth of opportunity for smaller, more focused cloud providers, but it can be hard to look away from the eye-popping numbers coming out of the Big 3,” Dinsdale said.

In fact, it’s hard to see the ceiling for these companies any time in the foreseeable future.

With a $50B run rate in reach, can anyone stop AWS?

Tech leaders can be the secret weapon for supercharging ESG goals

Published August 2, 2021

Jeff Sternberg
Contributor

Jeff Sternberg is a technical director in the Office of the CTO (OCTO) at Google Cloud, a team of technologists and industry experts that help Google Cloud’s customers solve challenging problems and disrupt their industries.

Environmental, social and governance (ESG) factors should be key considerations for CTOs and technology leaders scaling next generation companies from day one. Investors are increasingly prioritizing startups that focus on ESG, with the growth of sustainable investing skyrocketing.

What’s driving this shift in mentality across every industry? It’s simple: Consumers are no longer willing to support companies that don’t prioritize sustainability. According to a survey conducted by IBM, the COVID-19 pandemic has elevated consumers’ focus on sustainability and their willingness to pay out of their own pockets for a sustainable future. In tandem, federal action on climate change is increasing, with the U.S. rejoining the Paris Climate Agreement and a recent executive order on climate commitments.

Over the past few years, we have seen an uptick in organizations setting long-term sustainability goals. However, CEOs and chief sustainability officers typically forecast these goals, and they are often long term and aspirational — leaving the near and midterm implementation of ESG programs to operations and technology teams.

Until recently, choosing cloud regions meant considering factors like cost and latency to end users. But carbon is another factor worth considering.

CTOs are a crucial part of the planning process, and in fact, can be the secret weapon to help their organization supercharge their ESG targets. Below are a few immediate steps that CTOs and technology leaders can take to achieve sustainability and make an ethical impact.

Reducing environmental impact

As more businesses digitize and more consumers use devices and cloud services, the energy needed by data centers continues to rise. In fact, data centers account for an estimated 1% of worldwide electricity usage. However, a forecast from IDC shows that the continued adoption of cloud computing could prevent the emission of more than 1 billion metric tons of carbon dioxide from 2021 through 2024.

Make compute workloads more efficient: First, it’s important to understand the links between computing, power consumption and greenhouse gas emissions from fossil fuels. Making your app and compute workloads more efficient will reduce costs and energy requirements, thus reducing the carbon footprint of those workloads. In the cloud, tools like compute instance auto scaling and sizing recommendations make sure you’re not running too many or overprovisioned cloud VMs based on demand. You can also move to serverless computing, which does much of this scaling work automatically.

Deploy compute workloads in regions with lower carbon intensity: Until recently, choosing cloud regions meant considering factors like cost and latency to end users. But carbon is another factor worth considering. While the compute capabilities of regions are similar, their carbon intensities typically vary. Some regions have access to more carbon-free energy production than others, and consequently the carbon intensity for each region is different.

So, choosing a cloud region with lower carbon intensity is often the simplest and most impactful step you can take. Alistair Scott, co-founder and CTO of cloud infrastructure startup Infracost, underscores this sentiment: “Engineers want to do the right thing and reduce waste, and I think cloud providers can help with that. The key is to provide information in workflow, so the people who are responsible for infraprovisioning can weigh the CO2 impact versus other factors such as cost and data residency before they deploy.”

Another step is to estimate your specific workload’s carbon footprint using open-source software like Cloud Carbon Footprint, a project sponsored by ThoughtWorks. Etsy has open-sourced a similar tool called Cloud Jewels that estimates energy consumption based on cloud usage information. This is helping them track progress toward their target of reducing their energy intensity by 25% by 2025.

Make social impact

Beyond reducing environmental impact, CTOs and technology leaders can have significant, direct and meaningful social impact.

Include societal benefits in the design of your products: As a CTO or technology founder, you can help ensure that societal benefits are prioritized in your product roadmaps. For example, if you’re a fintech CTO, you can add product features to expand access to credit in underserved populations. Startups like LoanWell are on a mission to increase access to capital for those typically left out of the financial system and make the loan origination process more efficient and equitable.

When thinking about product design, a product needs to be as useful and effective as it is sustainable. By thinking about sustainability and societal impact as a core element of product innovation, there is an opportunity to differentiate yourself in socially beneficial ways. For example, Lush has been a pioneer of package-free solutions, and launched Lush Lens — a virtual package app leveraging cameras on mobile phones and AI to overlay product information. The company hit 2 million scans in its efforts to tackle the beauty industry’s excessive use of (plastic) packaging.

Responsible AI practices should be ingrained in the culture to avoid social harms: Machine learning and artificial intelligence have become central to the advanced, personalized digital experiences everyone is accustomed to — from product and content recommendations to spam filtering, trend forecasting and other “smart” behaviors.

It is therefore critical to incorporate responsible AI practices, so benefits from AI and ML can be realized by your entire user base and that inadvertent harm can be avoided. Start by establishing clear principles for working with AI responsibly, and translate those principles into processes and procedures. Think about AI responsibility reviews the same way you think about code reviews, automated testing and UX design. As a technical leader or founder, you get to establish what the process is.

Impact governance

Promoting governance does not stop with the board and CEO; CTOs play an important role, too.

Create a diverse and inclusive technology team: Compared to individual decision-makers, diverse teams make better decisions 87% of the time. Additionally, Gartner research found that in a diverse workforce, performance improves by 12% and intent to stay by 20%.

It is important to reinforce and demonstrate why diversity, equity and inclusion is important within a technology team. One way you can do this is by using data to inform your DEI efforts. You can establish a voluntary internal program to collect demographics, including gender, race and ethnicity, and this data will provide a baseline for identifying diversity gaps and measuring improvements. Consider going further by baking these improvements into your employee performance process, such as objectives and key results (OKRs). Make everyone accountable from the start, not just HR.

These are just a few of the ways CTOs and technology leaders can contribute to ESG progress in their companies. The first step, however, is to recognize the many ways you as a technology leader can make an impact from day one.

What SOSV’s Climate Tech 100 tells founders about investors in the space

Why Square is shelling out $29B to snag BNPL player Afterpay

Published August 2, 2021

Shares of Square are up this morning after the company announced its second-quarter earnings and that it will buy Afterpay, an Australian buy now, pay later (BNPL) player in a $29 billion deal. As TechCrunch reported this morning, Afterpay shareholders will receive 0.375 shares of Square in exchange for their existing equity.

Shares of Afterpay are sharply higher after the deal was announced thanks to its implied premium, while shares of Square are up 7% in early-morning trading.

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Over the past year, we’ve written extensively about the BNPL market, usually from the perspective of earnings from companies in the space. Afterpay has been a key data source, along with the yet-private Klarna and U.S. public BNPL outfit Affirm. Recall that each company has posted strong growth in recent periods, with the United States arising as a prime competitive market.

Most recently, consumer hardware and services giant Apple is reportedly preparing a move into the BNPL space. Our read at the time was that any such movement by Cupertino would impact mass-market BNPL players more than niche-focused companies. Apple has a fintech base and broad IRL payment acceptance, making it a potentially strong competitor for BNPL services aimed at consumers; BNPL services targeted at particular industries or niches would likely see less competition from Apple.

From that landscape, let’s explore the Square-Afterpay deal. We want to know what Afterpay brings to Square in terms of revenue, growth and reach. We also want to do some math on the price Square is willing to pay for the company — and what that might tell us about the value of BNPL and fintech revenues more broadly. Then we’ll eyeball the numbers and try to decide if Square is overpaying for Afterpay.

What Afterpay brings to Square

As with most major deals these days, Square and Afterpay released an investor presentation detailing their argument in favor of their combination. Let’s dig through it.

Square is a two-part company. It has a large consumer business via Cash App, and it has a large business division that offers payments tech and other fintech services to corporate customers. Recall that Square is also building out banking services for its business customers and that Cash App also serves some banking and investing functionality for consumers.

Yaydoo secures $20M, aims to simplify B2B collections, payments

Published August 2, 2021

It’s no secret that the technology for easy business-to-business payments has not yet caught up to its peer-to-peer counterparts, but Yaydoo thinks it has the answer.

The Mexico City-based B2B software and payments company provides three products, VendorPlace , P-Card and PorCobrar, for managing cash flow, optimizing access to smart liquidity, and connecting small, midsize and large businesses to an ecosystem of digital tools.

Sergio Almaguer, Guillermo Treviño and Roberto Flores founded Yaydoo — the name combines “yay” and “do” to show the happiness of doing something — in 2017. Today, the company announced the close of a $20.4 million Series A round co-led by Base10 Partners and monashees.

Joining them in the round were SoftBank’s Latin America Fund and Leap Global Partners. In total, Yaydoo has raised $21.5 million, Almaguer told TechCrunch.

Prior to starting the company, Almaguer was working at another company in Mexico doing point-of-sale. His large enterprise customers wanted automation for their payments, but he noticed that the same tools were too expensive for small businesses.

The co-founders started Yaydoo to provide procurement, accounts payable and accounts receivables, but in a simpler format so that the collection and payment of B2B transactions was affordable for small businesses.

Image Credits: Yaydoo

The idea is taking off, and vendors are adding their own customers so that they are all part of the network to better link invoices to purchase orders and then connect to accounts payable, Almaguer said. Yaydoo estimates that the automation workflows reduced 80% of time wasted paying vendors, on average.

Yaydoo is joining a sector of fintech that is heating up — the global B2B payments market is valued at $120 trillion annually. Last week, B2B payments platform Nium announced a $200 million in Series D funding on a $1 billion valuation. Others attracting funding recently include Paystand, which raised $50 million in Series C funding to make B2B payments cashless, while Dwolla raised $21 million for its API that allows companies to build and facilitate fast payments.

The new funding will enable the company to attract new hires in Mexico and when the company expands into other Latin American countries. Yaydoo is also looking at future opportunities for its working capital business, like understanding how many invoices customers are setting, the access to actual payments, and how money flows out and in so that it can provide insights on working capital funding gaps. The company will also invest in product development.

The company has grown to over 800 customers, up from 200 in the first quarter of 2020. Its headcount also grew to 100 from 30 during the same time. In the last 12 months, over 70,000 companies have transacted on the Yaydoo network, and total payment volume grew to hundreds of millions of dollars.

Yaydoo is a SaaS subscription model, but the new funding will also enable the company to create a pool of potential customers with a “freemium” offering with the goal of converting those customers into the subscription model as they grow, Almaguer said.

Rexhi Dollaku, partner at Base10 Partners, said the firm saw the way B2B payments were becoming modernized and “was impressed” by the Yaydoo team and how it built a complicated infrastructure, but made it easy to use.

He believes Latin America is 10 years behind in terms of B2B payments but will catch up sooner than later because of the digital transformation going on in the region.

“We are starting to see early signs of the network being built out of the payments product, and that is a good indication,” Dollaku said. “With the funding, Yaydoo will be also able to provide more financial services options for businesses to address a working fund gap.”

All B2B startups are in the payments business

Mixlab raises $20M to provide purrfect pharmacy experience for pet parents

Published August 2, 2021

Pet pharmacy Mixlab has developed a digital platform enabling veterinarians to prescribe medications and have them delivered — sometimes on the same day — to pet parents.

The New York-based company raised a $20 million Series A in a round of funding led by Sonoma Brands and including Global Founders Capital, Monogram Capital, Lakehouse Ventures and Brand Foundry. The new investment gives Mixlab total funding of $30 million, said Fred Dijols, co-founder and CEO of Mixlab.

Dijols and Stella Kim, chief experience officer, co-founded Mixlab in 2017 to provide a better pharmacy experience, with the veterinarian at the center.

Dijols’ background is in medical devices as well as healthcare investment banking, where he became interested in the pharmacy industry, following TruePill and PillPack, which he told TechCrunch were “creating a modern pharmacy model.”

As more pharmacy experiences revolved around at-home delivery, he found the veterinary side of pharmacy was not keeping up. He met Kim, a user experience expert, whose family owns a pharmacy, and wanted to bring technology into the industry.

“The pharmacy industry is changing a lot, and technology allows us to personalize the care and experience for the veterinarian, pet parent and the pet,” Kim said. “Customer service is important in healthcare as is dignity and empathy. We kept that in mind when starting Mixlab. Many companies use technology to remove the human element, but we use it to elevate it.”

Where top VCs are investing in digital health

Mixlab’s technology includes a digital service for veterinarians to streamline their daily medication workflow and gives them back time to spend with patient care. The platform manages the home delivery of medications across branded, generic and over-the-counter medications, as well as reduces a clinic’s on-site pharmacy inventories. Veterinarians can write prescriptions in seconds and track medication progress and therapy compliance.

The company also operates its own compound pharmacy where it specializes in making medications on-demand that are flavored and dosed.

On the pet parent side, they no longer have to wait up to a week for medications nor have to drive over to the clinic to pick them up. Medications come in a personalized care package that includes a note from the pharmacist, clear and easy-to-read instructions and a new toy.

Over the past year, adoptions of pets spiked as more people were at home, also leading to an increase in vet visits. This also caused the global pet care industry to boom, and it is now projected to reach $343 billion by 2030, when it had been valued at $208 billion in 2020.

Pet parents are also spending more on their pets, and a Morgan Stanley report showed that they see pets as part of their family, and as a result, 37% of people said they would take on debt to pay for a pet’s medical expenses, while 29% would put a pet’s needs before their own.

To meet the increased demand in veterinary care, the company will use the new funding to improve its technology and expand into more locations where it can provide same-day delivery. Currently it is shipping to 47 states and Dijols expects to be completely national by the end of the year. He also expects to hire more people on both the sales team and in executive leadership positions.

The company is already operating in New York and Los Angeles and growing 3x year over year, though Dijols admits operating during the pandemic was a bit challenging due to “a massive surge of orders” that came in as veterinarians had to shut down their offices.

As part of the investment, Keith Levy, operating partner at Sonoma Brands and former president of pet food manufacturer Royal Canin USA, will join Mixlab’s board of directors. Sonoma Brands is focused on growth sectors of the consumer economy, and pets was one of the areas that investors were interested in.

Over time, Sonoma found that within the veterinary community, there was space for a lot of players. However, veterinarians want to home in on one company they trust, and Mixlab fit that description for many because they were getting medication out faster, Levy said.

“What Mixlab is doing isn’t completely unique, but they are doing it better,” he added. “When we looked at their customer service metrics, we saw they had a good reputation and were relentlessly focused on providing a better experience.”

SoftBank-backed Embark Veterinary valued at $700M after $75M Series B

5 lessons from Duolingo’s bellwether edtech IPO of the year

Published July 31, 2021

Duolingo landed onto the public markets this week, rallying excitement and attention for the edtech sector and its founder cohort. The language learning business’ stock price soared when it began to trade, even after the unicorn raised its IPO price range, and priced above the raised interval.

Duolingo’s IPO proves that public market investors can see the long-term value in a mission-driven, technology-powered education concern; the company’s IPO carries extra weight considering the historically few edtech companies that have listed.

Duolingo’s IPO proves that public market investors can see the long-term value in a mission-driven, technology-powered education concern; the company’s IPO carries extra weight considering the historically few edtech companies that have listed.

For those that want the entire story of Duolingo, from origin to messy monetization to historical IPO, check out our EC-1. It has dozens of interviews from executives, investors, linguists and competitors.

For today, though, we have fresh additions. We sat down with Duolingo CEO Luis von Ahn earlier in the week to discuss not only his company’s IPO, but also what impact the listing may have on startups. Duolingo’s IPO can be looked at as a case study into consumer startups, mission-driven companies that monetize a small base of users, or education companies that recently hit scale. Paraphrasing from von Ahn, Duolingo doesn’t see itself as just an edtech company with fresh branding. Instead, it believes its growth comes from being an engineering-first startup.

Selling motivation, it seems, versus selling the fluency in a language is a proposition that international consumers are willing to pay for, and an idea that investors think can continue to scale to software-like margins.

1. The IPO event will bring “more sophistication” to Duolingo’s core service

Duolingo has gone through three distinct phases: Growth, in which it prioritized getting as many users as it could to its app; monetization, in which it introduced a subscription tier for survival; and now, education, in which it is focusing on tacking on more sophisticated, smarter technology to its service.

This Week in Apps: Instagram restricts teens’ accounts, Elon Musk criticizes App Store fees, Google Play’s new policies

Published July 31, 2021

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.

Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year over year.

This Week in Apps will finally be a newsletter! It will launch on August 7. Sign up now!

Weekly News

Other Platform News (Apple & Google)

Apple announced plans to end support for a number of SiriKit intents and commands, including those that could impact major apps — like ride-sharing app Uber. In total, there are over 20 SiriKit intent domains that will be deprecated and no longer supported in new and existing OS releases, Apple says.

Apple tweaked the controversial iOS 15 Safari changes in the latest betas (iOS 15 and iPadOS 15, beta 4). The new Safari design had moved the tab bar (URL bar) to the bottom of the screen — a fairly radical change for one of the iPhone’s most used apps. It was meant to make the controls easier to reach but critics said that the change made other often used features — like the reload button or Reader Mode — harder to find and use, impacting the overall usability of the browser itself.

Google this week launched version 1.0 of Jetpack Compose, Android’s new, native UI toolkit aimed at helping developers build better apps faster. The tool had been in beta since March. The new production release is built to integrate with the Jetpack libraries developers already use, and offers an implementation of Material Design components and theming. New features include Compose Preview and Deploy Preview, which require Android Studio Arctic Fox, which is also out now in a stable release.

Google also announced the availability of the CarHardwareManager API via the Android for Cars App Library as part of Jetpack.

E-commerce

Twitter launched a U.S. e-commerce pilot test that will help determine the current appetite for online shopping on its platform. The test allows brands and businesses to feature a “Shop Module” with various products for sale at the top of their Professional Profile, a business-friendly version of a profile page with support for things like an address, hours, phone number and more. Users can click on the Shop Module to go to a retail website and transact. Early testers include Game Stop and Arden Cove. The feature itself is somewhat bare bones for now, as it’s really just an image that launches an in-app browser. That’s not enough to really compete with something like Instagram Shop or Shopify’s Shop and the integrated, native checkout experience those types of app offers.

Twitter launches US e-commerce pilot that lets users shop from profiles

Fintech

Fintech giant Robinhood raised $2.1 billion in its IPO this week. The IPO valued the trading app at $31.8 billion, making it larger that traditional rivals like Charles Schwab, even though the offering priced at the bottom of its range. The stock dropped 8% during its first day’s trading, however. Robinhood now has 21.3 million MAUs.

PayPal during its second-quarter earnings call announced its new “super app” is now code-complete and ready to roll out. The app will feature early direct deposit, check cashing, high yield savings, budgeting tools, improved bill pay, crypto support, subscription management, buy now, pay later functionality, mobile commerce, and person-to-person messaging features. The latter hadn’t yet been announced and would allow users to chat outside of the payments process.

PayPal’s new ‘super app,’ to include messaging, is ready to launch

Code found in Apple’s Wallet app indicates that iOS 15 will require users to verify their identities by taking a selfie when they add their driver’s license or other state identification card to the iPhone.

Social

Instagram announced a series of significant changes to how it handles the accounts of younger teens. The company says it will now default users to private accounts at sign-up if they’re under the age of 16 — or under 18 in certain locales, including in the EU. It will also push existing users under 16 to switch their account to private if they have not already done so. In addition, Instagram is rolling out new technology aimed at reducing unwanted contact from adults — like those who have already been blocked or reported by other teens — and it will change how advertisers can reach its teenage audience. The changes give the company a way to argue to regulators that it’s capable of self-policing as it attempts to roll out a version of Instagram to younger users under the age of 13.

Instagram to default young teens to private accounts, restrict ads and unwanted adult contact

Twitter rolls out an update to its live audio platform, Twitter Spaces, that will make it easier to share the audio room with others. Users will be able to compose a tweet right from the Space that links to the room and includes any accompanying hashtags. iOS users also received new guest management controls for hosts.

Snapchat resolved an outage that was stopping people from logging in on Thursday. Unlike other app blips, which fix themselves often without users’ awareness, Snap told users to manually update their app if the issues continued.

Snapchat also this week added a “My Places” feature to Snap Map, which allows users to log their favorite spots, share them with friends and find recommendations. The feature supports over 30 million businesses and allows Snap to differentiate its map from a utility like Google Maps or Apple Maps, because it’s about personal recommendations from people you know and trust: your friends.

Snapchat adds My Places feature to Snap Map, recommending spots to visit

Instagram added support for 60-second videos to its TikTok clone, Reels. Previously, only Reels of up to 30 seconds were supported. Sixty seconds is in line with other platforms like YouTube Shorts and Snapchat’s Spotlight. But TikTok is now inching into YouTube territory, as it recently expanded to support three-minute videos.

TikTok expanded its LIVE platform with a huge lineup of new features including the ability to go live with others, host Q&As, use moderators and improved keyword filters, and more. For viewers, TikTok is adding new discovery and viewing tools, including picture-in-picture mode and ways to jump to LIVE streams from the For You and Following feeds. Some markets, including the U.S. already had access to LIVE Events, but the feature is now expanding. Meanwhile, the co-host feature currently supports going live with one other creator, but TikTok says it’s now testing multiple hosts.

TikTok expands LIVE platform with new features, including events, co-hosts, Q&As and more

Discord launched a new feature, Threads, which will make it easier to read through longer conversations on busy servers. Now, any server with “Community” features enabled will be able to transform their messages into threaded conversations across mobile and desktop. The threads will be designated by their own subject name and can be created by selecting a new hashtag symbol that appears in the menu when hovering over messages or by pressing the + sign in the chat bar.

Pinterest shares dropped by more than 12% after the company reported its second-quarter earnings on Thursday. Despite beating on estimates with revenue of $613.2 million and earnings per share of 25 cents, investors were disappointed by the miss on user growth. The company reported monthly active user growth of just 9% to reach 454 million, when analysts were expecting 482 million. Pinterest blamed COVID impacts for the slowdown. The news follows Pinterest’s launch of new tools for creators to monetize their content, with Ideas Pins — the recently launched video-first format that lets creators show off their work. Now, creators can make their pins “shoppable” and take commissions on those purchases.

Pinterest shares drop as company misses on user growth … again

Messaging

WhatsApp is testing support for higher image upload quality on iOS devices. The feature was discovered on WhatsApp’s TestFlight version for iOS but is not yet public and offers three options: auto, best quality or data saver.

Streaming & Entertainment

Spotify’s Clubhouse clone, Greenroom, is off to a slow start. The app has only been downloaded 140,000+ times on iOS and 100,000+ on Android, including installs from its earlier life as Locker Room, an app that Spotify acquired to move into live audio. Meanwhile, Spotify has 365 million monthly active users on its flagship streaming app.

Spotify’s clone of Clubhouse tops 140K installs on iOS, 100K on Android

Spotify also reported its Q2 earnings this week, where it posted a $23.6 million loss and failed to reach its forecast for total MAUs, despite growing MAUs 22% YOY to 365 million. It now has 165 million paying subscribers, which is up 20% YOY.

In a change to its app, Spotify added an attention-grabbing “What’s New” feed that offers personalized updates about new releases and new podcast episodes. The feature is available through a notification bell icon and uses a blue dot to indicate when there’s something new to see. Dots like this are a psychological hacks popularized by social apps like Facebook and Instagram to addict users, which could impact user engagement time on Spotify’s app.

Apple’s GarageBand app for iOS and iPadOS now lets you remix tracks from top artists and producers like Dua Lipa and Lady Gaga. There are also new Producer Packs with beats, loops and instruments created for GarageBand by top producers, including Boys Noize, Mark Lettieri, Oak Felder, Soulection, Take A Daytrip, Tom Misch and TRAKGIRL.

Google TV’s mobile app was updated with new services and personalized recommendations, following last fall’s launch of the Google TV user experience for Chromecast devices. The app now sports 16:9 widescreen movie and show posters, and added new providers Discovery+, Viki, Cartoon Network, PBS Kids, Boomerang, plus on-demand content from live TV services, including YouTube TV, Philo and fuboTV.

Gaming

Epic Games announced that Fortnite will host another in-game event it’s calling the “Rift Tour,” which kicks off Friday, August 6 and runs through Sunday, August 8. What it hasn’t yet said is what the Rift Tour is, beyond a “musical journey into magical new realities” that will feature a “record-breaking superstar.”

Health & Fitness

Facebook’s Oculus division is exploring an integration of Oculus Workouts with Apple’s Health app, according to the app’s code. An integration would allow users to store their workout data in Health.

Productivity

Usage of mobile video conferencing apps like Zoom grew by 150% in the first half of 2021, according to a report from Sensor Tower. Zoom, Microsoft Teams and Google Meet saw a surge in usage, collectively climbing to nearly 21x higher than in H1 2019, the firm found.

Google Voice’s app was updated with a few refinements, including a way to see the reason for a missed call or dropped call, and an easy way to redial. iOS users can now show their Google Voice number as their caller ID when they get a calling through a forwarding number. Another change will allow users to delete multiple SMS messages at once.

Edtech

Language learning app Duolingo raised $521 million in its U.S. IPO, priced above the marketed range. The company priced 5.1 million shared at $102, after first marketing them at $95 to $100.

Utilities

Amazon this week rolled out an update to its Alexa iOS app that allows users to add an Alexa widget to their iOS homescreen. The widget lets you tap on a button to speak to the virtual assistant and issue commands. Watch out Siri! (Ha, just kidding.)

Google Maps also updated its iOS app this week to add support for a homescreen widget. There are two different widgets sizes to choose from — one that gives info like weather and traffic, while another is more of a shortcut to nearby places like gas stations, restaurants, work and home.

Google is working on a”Switch to Android” app for iOS users that will copy over data and apps from an iPhone to bring them to a new Android device. Apple already offers a similar app, called “Move to iOS” for Android users.

Transportation

Parking app usage has popped to pre-pandemic levels, Apptopia reported. Apps in this space help users find availability in lots and garages nearby and facilitate payments. Browsing time in apps was up 57% YOY in July, and overall parking app usage is now 6.2% above Jan. 2020 pre-pandemic levels.

Moovit integrated Lime’s electric scooters, bikes and mopeds into its transit-planning app that’s live in 117 cities across 20 countries and continents, including the United States, South America, Australia and Europe.

Government & Policy

Tencent’s WeChat suspended new user registrations in China to comply with “relevant laws and regulations.” The move comes amid a broad crackdown on tech companies by Chinese regulators, related to data collection and other harmful practices.

Recently, China ordered Tencent and 13 other developers to fix problems related to pop-ups inside their apps, as part of the tech crackdown. The regulator also said it would tighten controls on misleading and explicit content used for marketing, and issued fines for offensive content to Tencent, Kuaishou and Alibaba.

Security & Privacy

Apple released patches for iOS, iPadOS and macOS to address a zero-day vulnerability that had been exploited in the wild. Apple said the exploit could exploit the vulnerability known as CVE-2021-30807 to execute arbitrary code with kernel privileges on a vulnerable and unpatched device.

Google Play Protect failed an Android security test, according to a report from Bleeping Computer. The mobile threat protection solution ranked last out of 15 Android security apps tested over a span of six months, between January to June 2021.

Funding and M&A

Product insights and analytics startup Pendo raised $150 million at a $2.6 billion valuation, ahead of its expected IPO. The round was led by B Capital, the firm from Facebook co-founder Eduardo Saverin, and included new investor Silver Lake Waterman, alongside existing backers. Pendo’s platform helps companies gather data on how customers use their apps, including clients like Okta, Toast and others.

Twitter “acqui-hired” the team from subscription news app, Brief, who will now join Twitter’s Experience.org group, which works on Twitter Spaces and Explore. Brief had offered a non-biased news app that allowed you to get both sides of a story and all the necessary facts. Deal terms weren’t disclosed.

Delivery app Gopuff confirmed its $1 billion fundraise at a $15 billion valuation, aimed at expanding its instant delivery service. TechCrunch previously reported the news when the Series H was still being closed.

Indian travel app Ixigo raised $53 million (Rs 395 crore), prepping the business for a valuation of $750 million-$800 million for its upcoming IPO. The round was led by Singapore sovereign wealth fund GIC.

Mobile-first digital wallet Valora native to the Celo network raised $20 million in Series A funding led by Andreessen Horowitz (a16z), a Celo backer, to become a global gateway to crypto.

Crypto wallet company Eco, backed by a16z, raised $60 million in new funding led by Activant Capital and L Catterton. Eco offers a digital wallet with rewards and no fees, and has average deposits of around $6,000.

Search API startup Algolia, which lets developers integrate real-time search in apps or websites, raised $150 million in Series D funding, valuing the business at $2.25 billion, post-money. The round was led by Lone Pine Capital. Algolia now has over 10,000 customers, including Slack, Stripe, Medium, Zendesk and Lacoste.

Brain Technologies raised $50+ million for Natural, a natural language search engine and super app for iOS, which wants users to stop switching between apps to order food, groceries or go shopping. Backers include Laurene Powell Jobs’ Emerson Collective, Goodwater Capital, Scott Cook and WTT Investment.

Messaging app Element, built on the decentralized Matrix protocol, raised $30 million in a Series B round of funding. Investors include open-source R&D lab Protocol Labs and Metaplanet. a fund from Skype co-founder Jaan Tallinn, as well as past investors Automattic and Notion.

Indonesia-based grocery app HappyFresh raised $65 million in Series D funding in a round led by Naver Financial Corporation and Gafina B.V. The app offers an Instacart-like grocery delivery service for parts of Asia, which today operates in Indonesia, Malaysia and Thailand.

Indian D2C beauty brand MyGlamm, which sells products through an app and website, raised $71.3 million in Series C financing, from Amazon, Ascent Capital and Wipro.

Downloads

Nanogram

Image Credits: Nanogram

Developer Kosta Eleftheriou may have taken on Apple in legal battles and on Twitter, as he points out the numerous app scams on the App Store, but that hasn’t stopped him from building new apps.

This week, Eleftheriou introduced Nanogram, a Telegram client app that works on the Apple Watch without needing an iPhone connection. Eleftheriou said he was inspired to build Nanogram because he wanted a Telegram app for his LTE Apple Watch and didn’t like the official version that didn’t provide “basic and reliable messaging functionality.” So he built his own app from scratch using the Telegram SDK, which allows you to send, receive and view all your messages and notifications right from your wrist — even if you don’t have your phone nearby. The app also supports Eleftheriou’s FlickType Swipe Keyboard for faster replies while on the go.

Eleftheriou notes the app doesn’t collect any personal information and requires an Apple Watch Series 3 or later, running watchOS 7 or later.

Lightricks’ Videoleap for Android

Image Credits: Lightricks

After seeing a 70% yearly increase for its iOS version, Lightricks brought its Videoleap app to the Google Play Store. The app has grown popular with online creators for offering professional quality editing tools on mobile, including those that let you apply artistic effects, mix videos with images, add text and layer transformations and more. The company says Videoleap users are now creating 35 million pieces of content per month, and 47% of users are exporting their creations to TikTok in pursuit of monetizing their content further. The app, like others from Lightricks (which also makes FaceTune and others), monetizes by way of in-app subscriptions.

Tweets

Apple app store fees are a de facto global tax on the Internet. Epic is right.

— Elon Musk (@elonmusk) July 30, 2021

There’s a total of *six* different touch targets in the iOS 15 beta 4 tab bar in Safari.

These exclude the ability to long-press the tab bar, swipe across it to change tabs, and swipe it up to open the Tabs view.

I’m…starting to think a single, small toolbar just won’t do. pic.twitter.com/EiD2mekVRL

— Federico Viticci (@viticci) July 27, 2021

Shortcuts has a new “Return to Home Screen” action in iOS 15 developer beta 4 – this has been long requested from the community and is great to see! pic.twitter.com/8E3ZB7FIYX

— Matthew Cassinelli (@mattcassinelli) July 27, 2021

I’ve been fascinated to watch the reaction to Safari in iOS 15 because in 2016-2017, I worked on a similar redesign for mobile Chrome that we never launched. Finally decided to tell a bit of that story here: https://t.co/gF4hepQM5V

— Chris Lee (@cleerview) July 25, 2021

something fun & playful our team has been working on. what are *creative* ways we can utilize voice for more engaging convos on Spaces? how would you use these tools?

let’s have fun & learn together @RichardPlom @reedm @audgeyaudgey @callmeparri @niw pic.twitter.com/4ZBahxwkDN

— Danny Singh (@Mr_DannySingh) July 22, 2021

For tech firms, the risk of not preparing for leadership changes is huge

Published July 30, 2021

Jason Dressel
Contributor

Jason Dressel is president of History Factory, which helps companies use their history and heritage to enhance and transform strategy, positioning, marketing and communication.

Every week over the past three and a half years, an average of three CEOs have exited tech companies in the U.S. That tally is higher — in good times and bad — than in any of the other 26 for-profit sectors tracked by executive search firm Challenger, Gray & Christmas. You’d think tech companies should be the paradigm of how to prep for leadership transitions, since they operate in such a constant state of flux.

They’re far from it.

A change of command is one of the most delicate moments in the life cycle of any organization. If mishandled, the transition from one CEO to the next can result in a loss of market valuation, momentum and focus, as well as key personnel, customers and partners. It may even become that turning point when an organization begins to slide toward irrelevance.

With so much at stake, 84% of tech execs agree that succession planning is more important than ever because of today’s fast-changing business environment, according to our new survey of corporate America’s leaders. Seven out of 10 survey respondents agreed that tech companies face more scrutiny than other multinationals during a transition.

84% of tech execs agree that succession planning is more important than ever because of today’s fast-changing business environment.

Yet we found that tech execs appear just as unprepared for C-suite transitions as their peers in other sectors. Three out of five respondents said their companies don’t have a documented plan to handle a leadership change, even though, by that same ratio, they acknowledge that a documented plan is the biggest determinant in seamless transitions.

The findings may not be troubling if these respondents were millennial startup founders, years from leaving their companies. The executives we polled, however, hail from 160 companies that have been in business for a minimum of 15 years — 35 are tech companies, the largest industry cohort in the survey.

The smallest companies have at least 1,500 employees and $500 million in annual revenue, while the largest have head counts of over 500,000 and revenue upward of $100 billion. They have been around long enough to understand — and put into place — risk management and crisis planning, including what happens should their leaders fall victim to the proverbial milk truck.

Tech execs should be more rigorous about succession planning for one important reason: institutional memory. Tech firms generally are younger than other companies of a similar size, which partly explains why the median age of S&P 500 companies plunged to 33 years in 2018 from 85 years in 2000, according to McKinsey & Co.

These enterprises clearly have accomplished a lot in their short lives, but in their haste, most have not captured their history, unlike their longer-lived peers in other sectors. Less than half of these tech firms, in fact, have formally recorded their leader’s story for posterity. That puts them at a disadvantage when, inevitably, they will be required to onboard newcomers to their C-suites.

It’s best to record this history well before the intense swirl of a leadership transition begins. Crucially, it will help the incoming and future generations of leadership understand critical aspects of its track record, the lessons learned, culture and identity. It also explains why the organization has evolved as it has, what binds people together and what may trigger resistance based on previous experience. It’s as much about moving forward as looking back.

Most execs in our poll get it, with 85% saying a company’s history can be a playbook for new executives to learn and prepare for upcoming challenges and opportunities. “History is the mother of innovation for any type of company,” one respondent said. “History,” writes another, “includes the roadmap to failures as well as successes.”

But this documented history cannot be a hagiography of the departing CEO. Too often, outgoing execs spend their last years in office constructing their own trophy cases. Even as they conceded their own flat-footedness on transition planning, the majority of execs said they have already taken steps to create and reinforce their personal legacies — two-thirds said they have already completed their own formal legacy planning, many with the blessing of their boards.

It’s ironic, then, that three out of five also said that the legacy of a CEO or founder often overshadows the skill set and experience a successor brings. Two-thirds of tech execs believed that the longer a leader has been in office, the more it complicates a transition.

Tech leaders can do this right and have done so. Asked which five big-name CEO transitions was most successful, respondents’ No. 1 was Apple’s handoff from Steve Jobs to Tim Cook (38%), followed by Microsoft’s page-turn from Steve Ballmer to Satya Nadella (28%). The others, at General Electric, General Motors and Goldman Sachs, each netted no more than 13% of votes.

Apple’s apparent predominance in this survey might contradict the advice to play down the aggrandizement of an exiting CEO and highlight the compilation and transfer of an organization’s history to the next chief executive. Jobs, after all, painstakingly managed his legacy until the end. But even as he continued to take center-stage, he also made sure to pass along Apple’s institutional knowledge and ethos to Cook over the 13 years they shared space on Apple’s executive floor.

Sooner or later, everyone in the C-suite today — including startup founders — will depart. For the sake of everyone they’ll leave behind, they should begin prepping for that day now.

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This Week in Apps: Instagram restricts teens’ accounts, Elon Musk criticizes App Store fees, Google Play’s new policies

Top Stories

Google Play updates its policies

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Weekly News

Other Platform News (Apple & Google)

E-commerce

Fintech

Social

Messaging

Streaming & Entertainment

Gaming

Health & Fitness

Productivity

Edtech

Utilities

Transportation

Government & Policy

Security & Privacy

Funding and M&A

Downloads

Nanogram

Lightricks’ Videoleap for Android

Tweets

For tech firms, the risk of not preparing for leadership changes is huge